The dialogue was called for by King Hamad Bin Issa Al Khalifa, with representatives of the main opposition bloc, Al Wefaq, among more than 300 people expected to attend.
CNN reports the purpose of the National Dialogue initiative, which is being held in the capital, Manama, is to reach a consensus on how to achieve reform, with Al Wefaq intending to present “fair demands”.
Anti-government protests in Bahrain have killed at least 32 people, while hundreds of opposition supporters remain in prison.
Al Wefaq's secretary-general, Sheik Ali Salman, told a rally on Friday that it would not compromise on demands including the release of political prisoners and a democratic government.
“We are heading to the talks, but we will not give up our demand for a government that represents the will of the people," Salman said, adding the group would withdraw from the talks if they did not produce results.
The majority Shia community of Bahrain, which makes up 70 percent of Bahrain's population, has long complained of discrimination at the hands of the ruling Sunnis.
Ahead of the talks, the king promised the Gulf nation would sanction an international investigation into the conduct of security forces during the unrest.
The United States, which has its 5th Fleet based in Bahrain, has strongly backed the talks, reports the Associated Press.
Speaking at a Friday sermon in Manama, Bahrain's top Shia cleric, Sheik Isa Qassim described the talks as “good steps in the right direction”, while urging the Sunni rulers to strive for “real reform” by also including opposition members sentenced to prison.